Modified, and not paying.

Bottom line

Here is the exercise. Take every federally insured credit union with at least $10 million of loans in both March 2025 and March 2026. That is 2,942 of them. Rank the ones reporting a nonzero modified balance by that balance as a share of total loans, cut them into quartiles, and put the 962 reporting nothing in their own group. Then wait a year and measure net charge-offs on the whole book.

Read the two right-hand columns together. The top quartile charged off 1.325% over the following year, three times the non-reporters. It had also charged off 1.375% in the year before it was ranked. So this is not the finding from Issue 12, where a full lot predicted losses a board could not yet see. The modified line does not run ahead of the losses. It sits on top of them. The question is what it adds once you already know that, and the answer is in Section III.

I · What the line is, and when it changed

Schedule A, Section 2, item 26 of the Form 5300: Account 1001F, total outstanding troubled debt restructured loans or modifications to borrowers experiencing financial difficulty. The instructions say what goes there for a credit union that has adopted CECL: "the number and amortized cost of loan modifications resulting in a new loan or a continuation of the current loan. Report modifications for 12 months from the modification date or until the loan is paid off, charged-off, sold, or otherwise settled. Any subsequent modification resets the timeline." Modifications count if they take the form of "principal forgiveness, an interest rate reduction, a significant payment delay, or a term extension (or a combination thereof)."

Item 27, Accounts DL0148 and DL0149, added in March 2024: "the number and dollar amount of modified loans to borrowers experiencing financial difficulty and, under their modified repayment terms, are past due 30 days or more or are in nonaccrual status." That is a redefault line. The securitization tapes in Issue 13 made me follow each extended loan forward six months to get it. Here the credit union files it.

Before CECL the same account held troubled debt restructurings under the old accounting definition. ASU 2022-02 removed the TDR concept for CECL adopters, most credit unions adopted at the start of 2023, and the system total dropped from $7.3 billion in December 2022 to $4.4 billion in March 2023 as the definition changed underneath it. Nothing in this brief compares a number after that line to a number before it.

Two and a half times in three years, against delinquency up 1.6 times. The December 2025 reading is the highest for this account since the series began in 2016, and the only readings above it were TDR balances under the old, broader definition. Whether that is more members in trouble or more credit unions working with them is not something the line can settle. What it can settle is what came next for the loans on it.

II · One in four is late again

Of the $10.15 billion modified at March 2026, $2.56 billion was already 30 or more days past due or in nonaccrual under the modified terms. That is 25.2%. It was 22.9% in the first quarter the line existed and 27.4% at the December 2025 peak. It runs with size: 8.6% of the modified balance at credit unions under $50 million, 21.3% at $1 to $10 billion, 28.5% above $10 billion.

Put that next to Issue 13. On the securitized subprime shelves, 29% of loans extended while under 60 days late were back at 60+ within six months. Here, at any given quarter, 25% of the modified book is 30+ or nonaccrual. Different clocks, different thresholds, and the credit union line only counts borrowers already in difficulty, so the two are not one number. But they land in the same place. A quarter of the loans given a second set of terms are not keeping them.

III · Where the line says something, and where it does not

Split the March 2025 cohort at the median of reported delinquency, 0.569% of loans. Inside each half, rank the reporters by modified share into quartiles again. Then look at next year's charge-offs.

In the clean half, nothing. A credit union with below-median delinquency and a heavy modified line charges off about the same as one with a light line, in every one of the nine cohorts. The field does not find hidden losses in a clean book. That is the opposite of what the repossessed inventory line did in Issue 12, and it is worth saying plainly rather than burying, because the masking story from the securitization tapes does not carry over to this filing.

In the delinquent half, a lot. Quartile 4 charges off 1.51% against 0.75 to 0.89% for the other three quartiles and 0.60% for non-reporters. Twice the losses of a peer with the same delinquency profile and a lighter workout book. That holds in all nine pairs.

IV · Nine cohorts, one ordering at the top

The ordering is only clear at the top. Below the top quartile the line does not sort anything. A modified balance under about 0.4% of loans is noise, the same lesson as the small repo number in Issue 12: a screen built on this field needs a floor, not a flag on any nonzero value.

Head to head, it is the weakest of the three standard measures. Spearman correlation with next-year charge-offs, across the nine pairs: prior charge-offs +0.60 to +0.79, reported delinquency +0.38 to +0.55, modified share +0.19 to +0.23. Holding delinquency fixed, modified share keeps +0.13 to +0.17. Holding delinquency and prior charge-offs fixed, +0.05 to +0.12. It carries something of its own. Not much.

It is not a size effect. Apply the top-quartile threshold inside each asset band separately and the credit unions above it charge off more than the rest of their band in all 54 band-pair cells. The narrowest is the $200 to 500 million band in the March 2024 pair, 0.500% against 0.497%, which is a tie in practice.

V · The redefault line, credit union by credit union

Account DL0149 lets you ask the Issue 13 question of each institution. Among reporters with the line filled in, 1,197 of 2,016 in the March 2026 cohort report zero non-compliance. Among the rest, the median non-compliant share is 22%. Split the reporters into those reporting zero, and the nonzero group into halves, and look at next year's charge-offs, for the five pairs the line has existed.

A credit union whose modified loans are failing at above the median rate charges off 0.88 to 0.97% the following year. One reporting zero non-compliance charges off 0.53 to 0.66%. That is the per-institution version of the Exeter-against-Honda spread in Issue 13, smaller, because the credit union line only ever counts borrowers who were already in difficulty.

VI · Half the lines are blank, and the dollars are in a few hundred hands

Of 4,250 federally insured credit unions filing March 2026, 2,246 report a nonzero modified balance. Among those with $5 million or more of loans, reporting runs from 37% under $50 million in assets to 100% above $10 billion. The small band is the least likely to fill it in and carries higher delinquency than any band below $10 billion, 0.98% against 0.71 to 0.83% in the middle bands. Same shape as the repo line. Whether a blank means no modifications or an unanswered question, the filing does not say, and every non-reporter group above is a blend of both.

The dollars sit in very few places. Of the $10.15 billion, $7.18 billion is at 202 credit unions whose modified line is 1% of loans or more. $5.35 billion is at 34 credit unions at 3% or more. The top quartile in the headline cohort, 495 institutions, holds $8.37 billion, 82% of the system total, on $451 billion of loans.

VII · What this does not show

Five things, so nobody has to find them for me.

One outside reference point, for context rather than support. The Philadelphia Fed found in April that the stock of severe auto delinquency is rising while the inflow of newly delinquent borrowers is stable, and pointed at loss-mitigation practice as the likely reason. The bureau data it used cannot see a modification. This filing can, and the picture it gives is a workout book growing faster than delinquency, with a quarter of it already failing its new terms.

Proof: every figure, traced

All figures were rebuilt from the raw NCUA call report archives for this publication. Recomputed means the number was rebuilt from the quarterly files and matched. Derived means calculated from recomputed figures, arithmetic shown. Verified means read straight from the cited public document.